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Federal budget does not announce any changes in Negative Gearing

real estateThe coalition is not looking to make any changes to Negative Gearing declared Alex Hawke, a Liberal Backbencher, while being questioned on the coalition’s earlier promise of scrapping it altogether. An article on Realestate.com clarified that the government claims any circulated newspaper reports to be completely baseless. The Federal Treasury dittoed the statement.

The tax review according to Hawke would be much broader in scope and not pick at negatively geared properties at all. He traded a safe line saying it was beyond him to comment what could be included or excluded but any proposed change in tax slab would certainly be forwarded for a mandate.

About 1.2 million Australians claimed tax deductions

An interesting statistics suggests that about 1.2 million people cumulatively enjoyed a tax break of $13 billion via deductions on losses against the slab of taxed income. Note- What may be referred to in the review instead is the Goods and Services tax (GST). You can read the full article here.

Hoopla about abolishing Negative Gearing must be stopped

I think that this whole hoopla about scrapping Negative Gearing should be quickly done away with. For Australia, a property happens to be negatively geared if the rental value of the property cannot offset the interest paid on the mortgage amount. While there may be some strength in the arguments that deducting losses from tax liabilities at MTR and offering continued property subsidies to investors (for negatively geared properties) is unfair, the other side of the coin must also be seen before making a final judgment.

Negative Gearing helps putting more residential properties on rent

The great argument in favour of Negative Gearing is its ability to encourage investors to buy properties for giving away in rent. This move increases the amount of rental properties as against the full housing stock and considerably reduces rent. Also, Negative Gearing is founded on the principle of low rental prices (because the interest on mortgage and cost of repair and maintenance needs to exceed rental income). In times when capital gains on house sales are likely to increase over the spectrum, more residential properties on rent makes a lot of sense. Thumbs up then to Negative Gearing!

Don’t you think that Negative Gearing reduces the pressure of housing demands greatly?